Many importers negotiate a shipment date (ETD) with their Chinese suppliers before orders are issued, and then fail to follow up on the production schedule.
I think they would avoid a lot of bad surprises if they asked for regular updates.
The danger of flying blind
Chinese suppliers know that asking for 3 weeks of delay is usually rejected. The purchaser might respond “if you ship that late, you’ll have to pay air freight”, or “in that case, the letter of credit won’t be valid anymore; the order is canceled”.
So what do savvy exporters do? They don’t reveal the situation clearly and in advance. They wait until 1 or 2 weeks before original ETD, and they announce a one-week delay “because the materials arrived late”. Then another 5 days “because of power shortages”. Then another 5 days “because we don’t have enough workers”. And so on, until production is three weeks behind schedule.
This process can be devastating for an importer who promised a delivery date to his domestic customers, and who has to postpone it again and again.
How to avoid discovering delays at the last minute?
Before issuing an order, you should ask for a few milestones. Here is a list that is probably too long:
- Arrival of all materials/components (and, if relevant, inspection of these inputs)
- Start of bulk production
- Sending of production samples
- 20% of order is finished (and, if relevant, in-process inspection)
- 50% of order is finished
- 100% of order is packed (and, if relevant, final inspection)
- Ex-factory date (at least 2 days after final inspection)
- Shipment date (ETD)
Then, when you reach each milestone, you can ask your supplier whether it was achieved. If not, they should update all remaining dates.
Sending someone in the factory (e.g. your purchaser, an inspector…) is a good solution to check the production status. At the same time, you can verify product quality.
Can you afford to do this?
If you really need to stay on top of production, you should do as described above.
But you need to find the right balance.
If you place orders with many suppliers, you might not have time to follow all these dates. And if your orders are not very large, you might not want to bother your suppliers with so many updates.
In such cases, you can reduce the number of milestones.
For example, you can track these dates: start of production, 20% of order completed, 100% of order packed, and shipment date.
The most important is to keep some visibility over the production schedule.
Maybe some readers can share their experiences?
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[Photo credit: http://www.flickr.com/photos/asurroca/51024419/sizes/m/in/photostream]
Great article Renaud, especially the call out to customize the ‘milestones’ according to the situation. Even staying partially on top of the production schedule can certainly eliminate the number of “surprises” both in delays and in quality.
Thanks Kristy!
The key is to avoid trusting the supplier’s salespeople. In most cases, they are interpreters. In very few cases are they project managers.
One thing that should be looked at is the QC inspection. I have experience with Chinese inspectors who became over familiar with suppliers (this is a ploy of course), where you will find the inspector is working with the supplier and not you.
Even reputable QC agents sometimes find this problem. Large suppliers will be generous towards the inspector. You will need to keep on top of this also.
Yes I saw it happen, too. That’s because these inspectors are not properly managed.
It is a difficult problem to overcome… you will end up with so many managers watching the watchers it will become ridiculous. How do you manage the QC inspector who is “on site”?
An understanding of who the system works in China is essential. An understanding of the culture of business here is also essential. If you can find an honest and reliable manufacturer in China, they are worth their weight in gold.
Just an aside. Many manufactures in the cheaper end of the market are no longer making the product in China. It has become too expensive. They are taking the process off-shore to Bangladesh, Vietnam, Philippines etc as China has become too expensive and too difficult (yes, even for Chinese nationals) dealing with the government.
I disagree. The solution is not “managers watching the watchers”, but managers hiring the right profiles, setting up the right framework, and coaching the staff.
It is easy for outsiders to criticize our industry, and to say that having “clean inspectors” is not realistic. But things are changing in China, and what was considered normal 10 years ago is less so today — at all levels.
So you can find “honest and reliable suppliers”, just like honest and reliable manufacturers.
It is a risk in any industry in any country…… but if you do not understand the culture of business in China, as would be the same in ANY country, you will not understand the difficulties presented. That is what I am trying to say. What do you mean “our industry”? I did not mention any industry. Please don’t be so defensive. This is a forum for expression and trying to provide information that will be of use to some and not others. I have no idea what your industry is, but having been in the business here for 6 years directly, I am just offering insights.
I see. Naturally, managing staff in China has its particularities.
You mentioned QC inspectors in general, that’s why I mentioned our industry. Sorry if it seemed very defensive.