5 things small businesses need to do when sourcing in China

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A very interesting blog.”  –  A company in France

I was reading a discussion on Linked In today about helpful practices for Small Businesses and I thought about my own clients, past current and prospective.  Here is a short list of five things that I do not see a lot of small business owners doing when they come to me.

1.)    Understanding their own products. I work with small companies all the time that do not understand what their own products are made out of. Usually they have been getting a product from a supplier in China, based on a prototype of design but the supplier has all the hard production specs not them, the result being that the customer is not knowledgable about pantones, material weights, material  grades, finishes etc. etc . A I wrote the other day to a customer who wanted me to get some pricing info from China vendors but who just didn’t want to provide any but the most general specs because he was headed off to a trade show and was busy  “ This ( specs) is important not only because the quotes themselves are more accurate if the vendor has complete info, but more importantly it sends a message to the vendor that you are organized, understand your own business and have firm expectations, esp about cost. Please consider this when you put together your list.”

2.)    Understanding that the window of opportunity in China closes just as it does everywhere else. China sourcing is volatile. A vendor may give you a good price now and when you go back in 3 months the price will be triple. So you should try to time your business in China with your business at home. In other words, try not to make time-consuming, extensive inquiries with new vendors in China unless you are reasonably confident that you are going to have orders to give to those vendors.  I would add that vendors sometimes do a lot of work when they quote projects and/or make samples and they are hopeful of orders.  If those orders don’t come vendors are disappointed and they may not be interested when you approach them six months later because they have other, bigger, orders. I have seen this happen many times.

3.)    Taking account of all the costs associated with manufacturing in China. There are a lot of additional costs in overseas manufacturing – from FEDEX charges for samples to hiring a consultant ( like me) to  third-party QC inspections of your order before it leaves China.  Some of these costs can really drive up the unit cost for your product. Make sure you acknowledge your “true” landed costs when you evaluate your first cost. Figure in the cost of a third party inspection of your product into your landed cost. Many small businesses see a China inspection as a luxury. It is a necessity. 

4.)    Seeing the need for vendor audits and inspections and really understanding the value of doing due diligence. The concept of due diligence applies in China more than anywhere else. Yet, I don’t know if I have ever had a client who raised this issue in any early discussions about sourcing.  However, for me it is a subject for the first discussion.  As a UK China consulting firm commented to me recently: “Sadly I come across all too many people that have not bothered with any due diligence and think that Alibaba is the holy grail (as i am sure you have). “

5.)    Reading about China. Most of the people who discuss projects with me have not read any books on China manufacturing and I am not even sure they have read any books on China.  I think it is very valuable just to understand what you are getting into.  If you are travelling to a foreign country you usually get a Fodors Travel Guide.  If you are manufacturing in a foreign country shouldn’t you know something about the country before you get involved  there ?  There are a lot of good books on China sourcing out there ( some reviewed on this blog).

www.theeastasiaco.com

 

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