Some random thoughts on doing business in China

I am working on a project now which poses some problems. A customer of mine wants something a vendor does not want to give her:  lower cost.  My advice to my customer is simply to look for another vendor ( one reason being that I have seen some red flags with this particular vendor ).  Yet my customer insists on pursuing this factory because she likes their apparel designs.  I was thinking about this situation today simply because I want to give her the best advice possible.  Here is what I would tell her:

1.)  Just because you are interested in a vendor does not mean they are interested in you.  A case in point:  after I returned to Tokyo from the Canton Fair in November  I followed up with eight vendors I had met and discussed a project with.  Four of the vendors were very slow in replying or did not reply at all.  When I reported this to my customer he told me to keep trying saying that “all business people want to make money.”  Well, apparently that is not the case with these four vendors because almost two months later nothing has happened even after repeated emails and phone calls. These vendors, for one reason or another, are simply not interested in the business my customer has to offer them.   China is different nowadays. There are many factories that are busy and they do not want orders unless they are sizeable ( tens of thousands of pcs) and easy to do.  I have addressed this issue in previous blog posts. In short, you just can’t force a vendor to take your business. If you have any sense at all that they are not interested in working with you take your business elsewhere, fast. 

2.)  Just as when you buy a house you inspect every room in the house so when you evaluate a vendor you need to consider all variables e.g. cost, product design, QC, lead-time etc. You should not give weight to one variable e.g. low cost or low minimums, at the expense of all the other, sometimes equally important, things that get goods to market.  Just remember: it does not matter how good the design is, if the vendor cannot work with you to get quality product to your customers at a cost that they ( your customers ) are comfortable with then the design is absolutely worthless. 

 3.)  You have to be very careful when selecting a vendor in China. I have worked for or advised companies that have lost tens of thousands of dollars simply by partnering themselves with the wrong vendor in China. These fiascos usually are the result of either:

 a.)  a rush to find a supplier. 

 b.)  a buyer focuses on a part e.g. usually low cost or design  and is blind to the whole.  

In short,  it is wise to look at the picture carefully and from as many angles as possible.  And when you see blemishes don’t ignore them.

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Haste makes waste – and it is costly when doing business in China

I often receive inquiries from both existing and prospective customers about having a product made in China. Last week the tone in one of the emails I received was urgent,  “ We really need to find a vendor immediately and ship ASAP no later than March 2012.”  Unfortunately it is just not that easy, especially if you have yet to identify a vendor to work with. Finding good vendors in China takes time – at least three or four months and sometimes as much as a year. There are just so many bad vendors to wade through that you simply have to do your DD- including a challenging sample order – or you risk losing thousands of dollars in bad product and having to turn away important customers back home. 

You will also increase your costs if you approach vendors – new and old vendors both – with a sense of urgency.  If a vendor knows you need a product ASAP they will charge you a premium for it. Your first costs then will go up, sometimes dramatically. Vendors  are also more inclined to take short-cuts if they sense their customer is desperate– because you need the product quickly they know you might be willing to accept something that is not exactly to specification and they can therefore get by with using cheaper materials or skipping costly production steps altogether. I have seen this happen many times.  The root cause more often than not:  overseas buyers are rushing their vendors for their orders.   

The best way of approaching samples and/or production is to thoroughly evaluate your company’s situation, and know well what your needs are before approaching vendors with lead-time requests ( you would be surprised how many companies don’t do this but just assume they can get anything made in China and delivered when they want).  Ask your vendor when they feel they can deliver the product to you at the QTYs you have specified and if that is around your request date, you may be able to work with them, getting them to move the date up a week or two without seeming desperate. If the delivery date the vendor has given you is much further out than what you have in mind, don’t force the issue with the vendor but go back to your customer and see if they are flexible about delivery dates.  I have learned that it is better to disappoint retail stores over the short term – with perhaps longer lead times – than over the long term – delivering product to them that they cannot sell to their customers .  Another way of looking at it is that it is perfectly acceptable if your company has a reputation among its customers as being a “little slow on delivery.”   If your company, on the other hand,  is synonomous with bad quality,  you will be looking for new customers.

Finally, I would add that vendors in China today do not like to have lead-times dictated to them by customers. Not only are they no longer desperate for orders in many cases but China vendors – like everyone in China -are keenly aware of China’s history of domination by foreign powers and dictating to your vendors what to do can ring with unfriendly overtones.  

As I always say,  work with your vendors, not against them