What do you do when your vendor raises costs ?

I had an email from an old client today regarding an increase in pricing and MOQ that she had unexpectedly received from her vendor. This is her email, edited for the purpose of this blog:

“I would really like your opinion on something if you have the time. As I have told you, things have been going well with Vendor X up north. We placed a small order and we went up to inspect it and it is now on its way to us. The leak in the boat came when I submitted some additional designs for consideration.

So, let me step back a bit. I sent a representation of samples early on for review and pricing based on 2000 units each. The pricing was good (15%-20% less than our Guangzhou factory) and the samples were very good.

We visited Vendor X’s factory and were very impressed with their order and cleanliness. The work they do is top-notch. We had a really good two or three days with them discussing our business practices, and I sincerely believe they are good people.

We submitted the order and saw it through and product is on it’s way to us and they have another order in hand.

I submitted 4 dress styles for pricing and they have come back with pricing that is higher that what we are currently paying in the south and with MOQ’s that are extremely high. I am talking quantities we don’t even do with (name of major global retailer) per SKU.

Mary, whom I correspond with at the factory, says that it is the fabric mills that are forcing their hand in these high MOQ’s. I have visited these very fabric mills and I truly understand the volumes of fabric that must be processed when a special dye lot is requested or a print or glitter application. But this is not a problem we run into in the south of China much. We are able to get rather low minimums.

We just flat-out cannot work with the prices and minimums they have given us. I just wonder what you think of it all? Were we “played” by them in order to get out business? What could we have done differently?”

My client has done everything right here. She requested and approved samples before giving the vendor an order, inspected the factory and spent a few days there getting to know everyone, and inspected her first order before it left China. This is how you do business in China. I think the only thing she might not have done is to talk to her vendor about price increases and MOQ at the beginning, letting the vendor know that significant price increases would absolutely not be tolerated. And then to line up another vendor who could pick up the order should Vendor X prove unworthy. Had my customer been very firm about her expectations regarding price increases at the beginning then Vendor X – thinking they would raise prices and MOQ after a successful first order- may have just passed on the order altogether. Of course my client would have been short one vendor but she would have saved herself some time and an aggravating experience.

But what did the 18th Century poet Robert Burns say, “Even the best laid plans of mice and men go awry.” And this happens in China all the time. Doing business in China is all about reducing risk, which means eliminating the bad vendors before you get involved with them and feeling reasonably confident that the vendors you do give orders to will meet your standards. However, this is not to say that a vendor whom you have done your due-diligence on and who has delivered a perfect order to you may not turn around and become a problem vendor at a later point. It happens a lot. Short of a referral from a friend, which is hands down the best way to find a reliable vendor in China, you have to rely on due diligence, patience and luck.

I will update this story. I too have an interest in this since I found the factory for my client.

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