If you buy products from a few Chinese suppliers, do you have a system for managing them? And do you use data for that?
In this post, I’ll show you how to manage Chinese suppliers using facts and data.
How professional purchasers work
Professional purchasers tend to work in the following way with their key suppliers:
- Collect some key performance indicators (KPIs) that reflect their performance (typically about quality, cost, on-time deliveries, and service/responsiveness)
- Give feedback to the supplier at regular intervals (e.g. every month, or every 3 months), with comparisons
- Allocate orders based on performance, and on the hope of performance improvement
How to work with suppliers, to improve their performance?
I am amazed by how few importers provide structured and data-based feedback to their key suppliers.
If you do it, you might be the only customer who shows these data are tracked! Your suppliers will likely pay attention (as long as you are not a very small customer). The salesperson will probably show it to other people and discuss it.
On top of formal feedback, what could you do?
- Send someone to their facility to “sell” the need to improve their performance — this needs to be someone capable of creating a meaningful human connection and drive change, not a robotic order processing clerk…
- Challenge a supplier. Show them their competition is doing better.
- Request their general manager to come to your office/factory and explain their poor performance.
- And, of course, penalties and chargebacks. Sadly, treating them like children is sometimes the only thing that works…
I have started to give regular training to our team internally. This was intended for our supplier auditors and our project managers, but I recorded it separately and it can be useful for your company’s purchasers too.
(Can’t see the video above? Use this link to watch it: How importers can push their suppliers to improve. Also, the sound quality is not always top-notch. Sorry about that. But the content is still easy to consume.)
Typical KPIs that you can track about your suppliers
In the video below, I cover typical KPIs in more depth.
As a bonus, I also cover a way to explain to your suppliers the link between quality issues and the costs they generate:
- Costs to THEIR company — I show a breakdown of typical such costs. Factory owners care a lot about RMBs, and that’s how you need to talk to them!
- Costs to YOUR company (the buyer) — not only in USD but in wasted time, too. It can all be converted into points for easy aggregation and interpretation.
(If you can’t see the video above, use this link to watch it: The most common supplier KPIs for importers)
Now, based on this advice, can you see how to manage your Chinese suppliers in a different light? Let me know in the comments, please.
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michael xu says
Practical and useful suggestions. actually, it is a helpful way to manage all suppliers around the world. not only for suppliers in China. You have to evaluate the suppliers by facts and data(pricing, OTD, quality,etc) which is fair and objective. During my previous 17 years work experience as a supplier quality management and sourcing professional, I saw so many suppliers around the major manufacturing countiries(USA, Japan, Germany, Czech,China, Korea, Singapore, Malaysia, etc), Most of the suppliers or manufacturers have a tool(maybe many tools in some companyies) or system to record/evaluate/analyze the pricing, OTD. unfortunately, very few of them have a proper tool(QMS) to record/evaluate/analyze quality performance.