Sourcing in Japan? Not as crazy as it sounds.

What people are saying about Mulberry Fields
“a very interesting blog…” – a company in France

I have a project currently which involves sourcing the same product in China and Japan. Of course China is much cheaper on price but its product quality cannot match Japan’s. So my client is willing to pay more for a higher quality product. It is interesting to see how the vendors from both countries reply. I sent out about 15 inquires to vendors in China and only 2 so far have given me pricing. A few have said that they cannot do the product and the rest I have yet to hear from. In Japan I sent out inquires to 5 vendors all of whom replied to me in a day with lengthy emails in which they discussed the product and my customers requirements. The difference in how vendors have responded speaks volumes about business development in both countries and it reminded me of a conference for small businesses I went to two years ago here in Tokyo. It was said during the conference that in the current century people will look to China for price, to Germany for quality and to Japan for service.

But back to the subject of this blog post, sourcing in Japan. In fact, I had another inquiry recently from a lady who has a well-received product that she had been doing in China. She moved some of her production back to the US because of quality issues in China. Things were going well until her US manufacturer told her recently that they could no longer do her product – which involves a technical printing process that not many manufactures offer. They do have this process here in Japan though and I told her that it is worth looking into. I suspect that US and Japan manufacturing costs are not a whole lot different and for this reason she may be able to get here in Japan what she was getting in the US, though at a slightly higher cost.

In short, if you do have a value-added product that you will not consider China for because of quality issues, the US is certainly a place to look. But Japan might be as well.

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The Yiwu Market – the largest commodities market in the world. And worth a visit.

What people are saying about Mulberry Fields
I have already learned a great deal about China and your business through your website and blog posts. Very impressive.
-Company in Toronto.

If you ever have occasion to go to Shanghai you should take a day and visit Yiwu, in Zhejinag Province where you will find the largest wholesale commodities market in the world. There are over 50,000 continuous booths and permanent showrooms and about a half million products on display at any given time. If you are looking for consumer goods this is where you will find them, from apparel, to jewelry, to sporting goods to toys, etc etc. You name it and you will find it here.

There are a lot of 2nd and 3rd tier vendors in Yiwu which means that you may have to invest more over the long-run to manage quality. You will find higher caliber vendors at the Canton Fair and Hong Kong sourcing fairs, but if you have a simple non-design driven, low valued added product, and your bottom line is more important than quality then Yiwu can be a good place to source.

From Shanghai you can take a bullet train and be in Yiwu in less than 2 hrs. Doing Yiwu in a day though is not practical and you really should count on spending a few days there. Becasuse there are not many what I would consider nice hotels in Yiwu, a better option might be to stay in Hangzhou. I would add that the the train station in Yiwu is a mass of humanity and if you need to buy a ticket there to go back to Shanghai or Hangzhou, good luck. For this reason it is best to plan your trip in advance and make sure you have all your return tickets in hand when you go to Yiwu. But then again this is good advice for whereever you travel in China.

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China sourcing for small businesses – in a nutshell

What people are saying about Mulberry Fields
” ..a very interesting blog.” – a company in France

I was on Linked In last week and came across this post by a lawyer in Melbourne, Australia, David Salveson of MCP Group Lawyers, in one of the China discussion groups. I thought David put it as well as anyone in terms of what it takes to succeed when sourcing in China ( or at least what it takes to reduce risk). I asked him if I could reprint his post here in this blog and he said yes. So here it is along with some of my own comments at the end.

“The purchase of goods from China without the required due diligence is a recipe for disaster. Most if not all legitimate suppliers in China are there to help you through the procurement process but you have to do your homework first before placing any official orders with any supplier in China. Make sure you undertake an audit of the supplier, ascertain what associations and trading certifications it has, work out how long they have been in business, establish a working protocol around your expectations as to the procurement process, can you undertake an inline inspection, payment terms and delivery requirement expectations. Can you engage with an outside party to assist with certification of the manufacturing process? Learn who your supplier may have made similar products for before. Understand the age of machinery and skill level of employees. Do they have a social audit protocol? Work with your supplier on the development of counter samples, pre production samples and tooling processes. The adoption of a sampling and production schedule with key dates and expectations is a must to ensure satisfactory delivery.”

I agree with everything here with just a couple of caveats. I would not place too much stock in certifications or associations as they can be mere window dressing and sometimes fake. However, always look at licenses ( business and export) and make sure the name on the license is in fact the person you are dealing with. I would add that in fact the best way to do what David advises is to travel to China and see for yourself. In fact going to China to audit your suppliers is an example of doing your due diligence more than anything else.

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Doing your first order in China ? Start small.

What people are saying about Mulberry Fields
“I have read through quite a few of your blog posts and have enjoyed them very very much. We do business in China and face many of the challenges you describe. Much of what you write resonates with me and there are some very helpful tips” – a company in Utah.

It is always a wise idea when you are staring out with a new vendor in China to order as little as possible. The obvious reason you want to do this is to make sure the vendor can make and deliver your product before you give them a big order. Many vendors have an MOQ for a 40’ container but vendors are reasonable people and if they want your business badly enough and have a good enough relationship with their own suppliers, they may allow you to order a 20’ container. If you have a QTY that meets the vendors MOQ but will not fill a 20’ container, you can of course go LCL ( Less than Container Load). The problem with LCL shipments however is that if damage occurs it is sometimes hard to assign blame because there is a third-party consolidator involved. If you need to increase your order slightly to get to a 20’ container that would be advisable.

There are three additional reasons why ordering a 20’ is preferable to LCL:

1.) To see how your product packaging holds up over a month of transit. If you are shipping ceramics from China to the US and you get a container in which half your mugs are broken, this means you obviously need to improve your packaging. Inner or outer or both. Once again, if you use LCL it may be hard to know why or where damage happened.

2.) To see how your vendor loads the container. A well loaded container will maximize space with weight of product distributed evenly. If there are empty spaces vendors need to fill these spaces with dunnage or pallets so that cartons do not collapse onto each other and damage product. Heavy cartons should of course be placed on the floor of the container. And lighter cartons on heavy ones. Loading a container can take a couple of hours, is very physically demanding work and the tendency if someone is not supervising is to do it without care.

3.) To see if the product itself can withstand ocean transit. Containers pick up a lot of moisture when they are on the water for 14-21 days and this sometimes adversely affects the contents of the container. Product when it ships from China looks fine. But when it arrives in Oakland three weeks later, is moldy. Sometimes this is because there is not enough dessicant in the container. Sometimes the production process itself is flawed, vendors for example who do not allow product adequate drying time before loading into the container. If you and the vendor are the only ones touching the contents of the container then it will be easier to identify and solve problems.

In short, plan your business so that your first order is ideally a 20’ container of product you can use but will not need urgently to fill an important order. Avoid the scenario where your first order with a new vendor is a 40’ container of goods you need to deliver to your customer immediately upon receipt.

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Knowing your product’s “real” cost will save you a lot of time sourcing in China

What people are saying about Mulberry Fields
I have already learned a great deal about China and your business through your website and blog posts. Very impressive.” -a company in Toronto

I cannot stress the importance enough of knowing the “real cost” of your product. A case in point. A customer skyped me last night and told me that he had received a very good price on one of his products from a company in Shanghai. When he told me the price, I knew it was impossible. How did I know this? Well, I had been to the Canton Fair on his behalf and had shown the same product to 10-15 vendors, all of whom had quoted me costs far above what he had received from the Shanghai vendor. And I knew the Canton Fair quotes were accurate since they were independent quotes, all within $ 0.25 of each other. In several cases a vendor gave me an on-the-spot quote that was identical to a quote I had received from another vendor. But of course vendors know these consumer products inside and out since they manufacture so many of them. Sometimes all they need to do is glance at a product and they will tell you how much it costs.

If you know the real cost of your item you will save a lot of time in finding a vendor in China. You can immediately eliminate vendors who quote you an unreasonably high cost for your product and you can concentrate on those vendors whose pricing is in line with the “real” cost of the product.

Although you can certainly email specs to multiple vendors to see costs, I really think the most efficient way is to go to a trade fair and show vendors the actual product. It is a very enlightening process when you walk around a trade show and get on the spot quotes for your product. Not only do you learn the “real” cost very quickly but you will learn more about your own product this way. You become very confident in your product and pricing after this exercise. And keep in mind that the cost savings you achieve by knowing the “real” cost of your product and finding vendors who can meet those costs while giving you a good product, will in the long run more than pay for your trip to China.

Oh yes, in the end it did turn out that the price from the Shanghai vendor was too good to be true. Apparently the vendor made a mistake in their quote to my customer. Their cost was in fact about 15% more than the quotes I had gotten in Canton.

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Planning your production in China. Watch out for CNY.

What people are saying about Mulberry Fields
“I have already learned a great deal about China and your business through your website and blog posts. Very impressive.”   a successful mompreneur in Toronto

 

The headline in the China daily today was about labor shortages in China now.  This is of course peak time for labor shortages in China, as many workers do not return to their factories after Spring Festival.  In many cases they find when they go home that there is more opportunity than when they left.  And this is why in Guangzhou, the principal city in Guangdong Province there is a shortage of 110,000 workers now across many industries. In Guangdong itself the shortage is over a million workers currently.  In Eastern China it is better but there are also massive shortages of workers in cities there as well.

This is why it really helps to learn about the areas where you are going to be making your product and planning your production so as to avoid having important orders that are produced or are due to ship at or around Chinese New Year.  You also have to anticipate last-minute price increases on your orders as vendors need to raise wages to entice the old workers to come back or hire new workers. I personally would not advise putting ship dates on POs that are not at least 6-8 weeks out from the beginning or end of Chinese New Year.

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Book Review: China Shakes the World by James Kynge

What people are saying about Mulberry Fields
“Your blog posts are excellent.” a company in California with a presence in China.

Over the years I have found that the best China books are written by those who have lived in China for many years, and not those who are just “passing through” for a year or two on some journalistic or other endeavor. Only when you “go native” can you understand China. And a long-term resident of Beijing who speaks fluent Chinese, James Kynge, has most certainly gone native. Consequently, China Shakes the World is a very good book.

The book begins oddly enough in a small, economically depressed city in Germany, where a large steel mill is being dismantled for transfer to China. The Chinese buyer paid $ 26 million for the mill, another $ 12 million to move it to China and then another $1.2 billion to reassemble it in China. Initially the Germans looked at the project and said it would take three years. It took less than one. The most interesting thing about the story, however, is that the Chinese investor, Shen Wenrong, was at one time a peasant who had transformed himself into one of the richest men in China with no formal education. In fact there are many individuals in China like Shen Wenrong and Kynge introduces us to some of them. Each rags to riches story in modern China is fascinating and echoes the adversity laden paths to riches of some of America’s great capitalists in the early 20th Century.

Through Kynge’s eyes you can see how special China’s transformation over the last 30 years is and understand how it has been able to happen. According to Kynge, many provincial and local officials simply ignored many of Deng’s reforms because they thought they were not far-reaching enough. They just let local market forces be. Laissez fair with Chinese characteristics. And this explains the breakneck speed of China’s development over the past 30 years. Deng is given credit but the real credit goes to those who ignored Deng.

At the same time Kynge is careful not to fall into adulation of his subject, Although he admires China’s growth Kynge cautions that China has been mired in poverty since the Tang Dynasty, and even today there are many areas of China which are untouched by development. There are requisite sections on China’s fake industry, official corruption and China’s polluting industries. Kynge also questions China’s technological achievements over the past 20 years many of which were only able to happen because western firms had transferred technical know-how to their Chinese partners in exchange for access to China’s markets. Kynge seems skeptical of China’s technological prowess but does not reconcile this with the homage he has paid earlier in the book to China’s significant technological achievements prior to the 17th Century, of which there are many. There are also very interesting chapters on the negative impact of China on the textile industry in Tuscany, Italy and the tooling industry in Rockford, Illinois, both of which places Kynge spent time in while researching his book.

In the end though the message of China Shakes the World is positive. In spite of the drain on global resources like lumber, and the loss of jobs in industrialized countries, China’s emergence as a global power has been mostly good for the world, from cost-conscious US consumers who shop at Wal-Mart to emerging economies in Africa. And although China can still seem very hostile and xenophobic at times it is far too intertwined with the global economy nowadays to, in Kynge’s words, “bite the hands that feed it.”

Here are some other book reviews:

Poorly Made in China
The China Price
One Billion Customers
The End of Cheap China

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The best way to find a reliable supplier in China. Part 2 of 4

What people are saying about Mulberry Fields
“I have already learned a great deal about China and your business through your website and blog posts. Very impressive.” a successful mompreneur in Toronto

If you do decide that you want to attend a trade fair in China, you need to research this carefully. There are a lot of shows, the big ones being the Canton Fair and the Hong Kong sourcing fair. However there are a lot of other shows that are industry specific and may be worth attending depending on your needs. For example if you are in high-end furniture, you may think about attending one of the China Furniture fairs instead of the Canton Fair. Although the Canton Fair does have some very nice furniture, you may find more of it at the Shanghai International Furniture fair, for example. Because of the expense of attending a trade fair in China, you need to make sure you are attending the best fair for your company. If you can, get feedback from people who have been to the shows you are thinking about attending, perhaps by posting a discussion on Linked In.

Once you have decided on a trade fair, then you need to make your reservations at least a month or two in advance. People come from all over the world to attend trade shows in China and if you wait too long you will find that reservations are very difficult to make. Also, it is very important that you confirm your reservations before you leave. It seems that every time I am in China for the Canton Fair I hear about a hotel that overbooked guests or or someone tells me that the hotel did not have a record of their reservation. Needless to say you want to avoid that scenario. The key is giving your self ample time and planning well ahead of time. Attending a trade fair in China should not be a last minute decision.

Take plenty of samples with you to the trade show. You can give these to vendors and ask for quotes. If you don’t want to be overloaded, send your samples ahead of time via FEDEX to your hotel in China. The value of doing this cannot be overstated. Vendors often need to see actual samples in order to tell you if they can do something and if so what the cost will be. This is big advantage of meeting vendors in person.

If your trade show visit goes well you should have the names of at least 10-15 vendors, all of whom you have met and discussed your product in depth. You will return home with name cards, catalogs, first impressions, samples, product feedback, hundreds of photos, perhaps even the experience of visiting a factory or two ( If you meet local vendors) and a lot of hope. In short everything you need to start your business.

Here are the other posts in this series:

Part 4
Part 3
Part 1

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A Mompreneur’s concern: “ How do I find a factory where the workers are treated well? ”

What people are saying about Mulberry Fields
“Your blog speaks to the many issues I have experience with doing business in China “ a company in California

The other day a mompreneur tweeted me and asked me “ How does one find vendors who treat their workers well ?” That was an interesting question I thought but one that is not easy to answer. I told her that some vendors treat their workers humanely and some rule with an iron fist. But to find out who is doing what you really have to go a factory and see for yourself. Generally if you spend a week at a factory in China you can get a very good feeling for how the factory is run, and how workers are treated. But you need to be able to speak Chinese to do so because you really have to talk to the workers yourself. At least that has been my experience. I imagine that if you have a translator with you and you have him/her ask the workers how they are treated, the answer you will always get is “fine.” Whether that is the answer the worker gave or not you really have no way of knowing.

But this is a good question because if you talk to workers and find out they are not treated well then this means the factory may have high turnover or there might be other problems that could impact your production. Not to mention the fact that it may be hard for you to sleep at night if you are working with a factory that does not treat its workers humanely. Unfortunately there is really no way to know this without, as I said, just going there and seeing for yourself.

I would add that you have to be careful about packing too many western conceptions of fair labor into your luggage when you go to China. Because there are many factories where the conditions are not good, especially in rural areas. And you can never be sure that what you might interpret as a violation of worker rights is in fact so. For example, I was once at a factory in Shenzhen and the paint fumes in one of the workshops absolutely overwhelmed me. I noticed that none of the workers were wearing masks. I asked the manager about this and she explained to me that she gave the workers masks but they just took them off. They simply found them uncomfortable. To verify this I asked a couple of workers when the manager was not around. And they told me they did not like the masks. And that is why there were white surgical maskes just strewn all over the floor in the workshop…

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