It is good for importers to read about best practices. Many first-time buyers have never heard of letters of credit or quality control plans. They often find it useful to follow a “how-to” guide.
On the other hand, it is much easier (and funnier) to draw a list of the most common mistakes made by purchasers in countries like China or India. Maybe it’s the way my brain is wired. Or is it because “trouble is my business”?
My list of the “top 10” sourcing mistakes:
1. Looking for the lowest price
If you purchase something below market price, you are taking very high risks. Either quality will not be up to your standard, or you are about to get scammed.
2. Letting the supplier ship without checking product quality
Once a production batch is on a boat, it’s too late . Verify quality yourself, or pay for quality inspection services. And do it systematically, at least for the first 5 shipments (after that, you can do random skip-lot QC).
3. Failing to realize that pre-production samples are selling tools
Many buyers who are surprised that samples are not representative of bulk production. But getting an order and a cash deposit is one thing, and manufacturing the goods is another thing! Your job is to check whether production is up to the P-P samples…
4. Displaying obvious distrust towards one’s suppliers
One of my clients does this. Her suppliers hate her, and they often get into arguments. You need your suppliers (1) to have a good image of you, and (2) to know that you care about them. If not, nobody will look after your production in the factory.
5. Not keeping two weeks of padding in the shipment schedule
There will be delays, with a certainty comprised between 30% and 90%. So plan for it. Bonus: even worse than failing to plan for delays, is pushing the factory to reduce production time.
6. Paying everything in full while one still needs leverage
Some purchasers get a really good feeling about a supplier and agree to wire 100% of the order amount in advance. Then the manufacturer has no incentive to hurry up or to produce up to the standard. If quality issues are uncovered (and that’s only if they allow for an inspection), the factory might refuse to rework the goods.
7. Accepting to be left in the dark regarding your own supply chain
Do not rely on a middleman, upon which your whole company’s success rests. Qualify the factory, if possible get to know/approve the sub-suppliers. You will make it up many times in the long run. It is so basic, but so many people get this wrong.
8. Forgetting to describe an essential product attribute or even the entire packaging
If you don’t specify your expectations in detail, a factory technician will take the decision for you, based (most probably) on cost savings. And you will not even be able to protest when you notice it.
9. Hoping that an unsatisfactory manufacturer will get better over time
Based on a recent unscientific survey, it looks like it is a bad idea to give a second order to a factory that just produced substandard quality. Rather than rolling the dice (when the odds are 90% against you), nurture a backup manufacturer.
10. Not registering one’s trademark when buying from China
Do you want a competitor to force your manufacturer to stop production? Do you want a supplier to sell your goods on the local market? Then register your IP. I am not a specialist, but you can read more here.
Other candidates that nearly made it in the top 10:
Not having a contract
A contract that can be enforced locally is definitely very useful. However, game theory teaches various strategies to adopt in “non-cooperative” situations, and you can adopt them. For example: “take little steps” (i.e. issue small orders), “verify constantly” (i.e. QC) and “use a third-party” (i.e. a letter of credit).
Trying to manufacture small quantities in China
It will usually push you in the arms of small trading firms that deal with small workshops. The result in 90% of cases: quality disasters and/or long delays. But there is a solution if you can purchase non-customized items: produce them in coordination with a non-competing importer. Hard to pull off, I admit, but worth giving a shot!
Very thorough list Renaud and a good standard checklist for any importer. Point #8 is spot-on. Many times importers don’t describe something, and what they don’t understand is that the factory is a machine that once you get them started, they move forward, full-force – unless you are one of their larger customers, they are not going to stop with every question and play 20 questions with the importer – “What did you want here? What size should this be? What material for this?” They are just going to do it…right or wrong. The importer (especially Western) thinks, “they should ask”….they “should” but I don’t want successes or failures based on something they “should” do. You’ve got to make it up to you. I think you gave me my next blog idea here, man…thank.
Hi Jacob,
This is so true: “the factory is a machine that once you get them started, they move forward, full-force”…
It it the buyer’s responsibility to ensure that they have understood all there was to understand — and then to verify that they follow it!
Thanks Veronika…
Hello Renaud,
This is an excellent post..! All your points are exactly spot-on. I’d mention the production samples.. too many buyers fully rely on them!
Over and over again, we have to show our clients the different thinking and the special practices of the Chinese manufacturers.
There are too many ways how to create a non-complying product, with not always the manufacturer to be blamed.
This is a good and useful artical. The point 2. Letting the supplier ship without checking product quality is very important to importors. If importers want to buy good quality of goods from Asia, it is best to choose a inspecton services company to help checking quality before shipment.
Nancy,
Yes, they can either use a third-party QC firm or send someone from their team…
I found 15 chinese manufacturers on Alibaba. After many emails, setup factory visits with 7 of them and am about to hop on a plane to China to select the one or two that I feel could work best, not necessarily based on price. I plan to inspect all items before shipping.
Got to say your posts come across as quite daunting. I wonder if its worth the hassle, travel and expense.
Thomas,
You are right, it might not be worth the hassle if you place small orders.
True, and helpful!!
Thank you, Renaud.
If only the West would manufacture again, it would save all this hassle and we’d all be better off. Its the benefit culture that is the problem in the West.
Actually, in certain categories, the West is manufacturing a lot… And is more competitive than China. And that trend is picking up speed, especially in places like Mexico and the US.
I don’t know if, overall, supply chains will get shortened, though. Too many companies are set up to accomodate fareast sourcing efforts. They are either happy with China, or looking for suppliers in other low-cost countries.
Hi Renaud
If the products fail inspection, you still might have a problem with leverage even if you have paid only the 30% deposit.
If the contract is written in English and Chinese, would there be more chance of getting a claim heard if ultimately you decided to take the factory to a local court?
Yes that’s right, but you have more leverage than the supplier at that time (except if the supplier can sell your products in another channel easily). The supplier is waiting for final payment.
To maximize your chances, get a contract with a Chinese version that “controls” and that calls for dispute resolutions in China.
Thank you Renaud
I might add that unless you are talking a very big order, if you have to take your supplier to a local court then your ship has probably already sunk. Not to mention your relationship with the supplier will likely be irreparable at that point.
Point taken David, but we are talking about leverage here, so hopefully the potential threat is just enough for the supplier to play straight
David, John,
I agree with both of you!
Great article Renaud. Totally agree with the price mistake importers make. Not to mention, if you somehow do manage to get an order at a great price with great quality (good luck!), then your supplier will have little profit and therefore little point in keeping your business and providing good service to you. No one wants to lose a profitable customer.
Yes unfortunately that’s how it sometimes works…