Not all China sourcing companies give good advice

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 kid’s apparel company in Utah.

I have been going to China since 1988.  That is 25 years of China experience.  I like to think that I have learned a lot in that time and can help other people get started in China.  And that is in fact my job. But I still feel that there is much more to know and to this end I am continually educating myself about all aspects of China, including language and various industries because I use this knowledge in my work. Not a week goes by when I don’t have to email a supplier in Chinese or learn something about a product or industry.

I also like to read other China blogs because I feel I can learn from my peers and I like to keep abreast of what is going on in China ( I am based in Tokyo). Unfortunately when I do this I see a lot of bad advice out there. I was on the site of a US /China based sourcing company today – I think a pretty successful one judging by some of the names of the contributors to the company’s blog –  and I was absolutely aghast at much of the advice I saw there,  some of which was as follows:

1.)  When you begin looking for a vendor in China you should have few hundred prospects and narrow the field down to 5 based NOT on any communication with the vendor but on their visual presentation in the form of website or catalogs.  My reply. This is an absurd number of companies to go through when sourcing in China and would be an incredibly time-consuming endeavor that may not be based on your needs.  What happens if you spend 2 weeks narrowing down your list to 5 companies and then all those companies turn out to be  30% over your target cost ? Would you  have to go through all 300 companies again ?  A more reasonable number of companies in a sourcing project is 25 – 50 – depending on the project. That number should leave you with a few good prospects at the end.

2.)  Don’t consider a company that does not have a good website.  My response ?  Totally disagree. Many vendors in China do not have very good websites but they may nevertheless be good vendors. Conversely I have seen some great websites only to visit the companies represented on the websites to find nothing.  And in fact I might argue that the nicer the website, the more likely it is you are dealing with a trading co. and not the factory itself.  In short a website should not be used to judge a vendor, except to see what kind of product they have and to get a general idea about the company, esp location, history etc. One caveat is that any vendor without a website is a red flag. I would not do business with any vendor who did not have a website. But don’t let a bad or slow website bother you. It is par for the course in China. In short, don’t judge a book by its cover.

3.) Do not discuss cost when you first contact a vendor.  Again, I fundamentally disagree with this kind of advice. The person’s rationale is that you will likely be seduced by the low-cost and may not pay attention to more important things like quality systems, lead time, delivery etc. This sounds good but in fact it is hardly practical. Cost is in fact a very important part of sourcing in China.  In fact, when deciding whether or not to do business in China the two most important factors are usually cost and quality. Companies have margins that help them build their businesses and they must work with vendors who can help them meet these margins. Why waste time with a vendor discussing product development when that vendor is going to end up being too expensive for you ?  It is best to find out quickly who you can work with and who you cannot. And then when you have that list you can eliminate others based on other sometimes equally important criteria, like quality and lead-time.

I would add that when I source I tend to pay less attention to the high and low costs on any given sourcing project, knowing that the vendors who offer extremely low-costs are probably not good on quality, or cannot hold those costs and the vendors who offer high costs are just not going to be acceptable to my client.

4.) Make sure vendors you are interested in have a QC manual. Once again this sounds like a perfectly good piece of advice.  But the more important question is not if a vendor has a manual but if they have one do they actually use it ? Many do not.  I would say it is a better piece of advice  to visit your factory and see if they have a dedicated QC area and if it is being used. If not than any manual they have on hand or have emailed to you is worthless.  I would add that QC manuals are standard in some industries – electronic – and not so standard in other industries e.g. handicraft. So depending on your product, industry and vendor setup e.g. vendors that rely heavily on cottage industry the absence of a formal QC manual should not overly concern you.

5.)  Tell vendors you are negotiating with to match costs you have received from other vendors or forget about the business. Sounds good but half the time it just does not work.  Many vendors have their own bottom line and the cost they give you covers this bottom line. It does not matter how much you tell them about the better costs  you have received from other vendors, if the vendor you are approaching simply cannot make your product at a cost that is acceptable to them ( not the  cost that is acceptable to you) they will simply not take your order.  A better strategy I think is to work with “target costs” and give these to vendors. This is less threatening to vendors and I think allows for more flexibility on both sides when trying to reach an agreement or cost that is workable to both parties.

In all fairness to the person who runs this sourcing company, there are a couple of good pieces of advice, namely visiting your vendors before doing business with them ( nothing but common sense here)  and hiring a third part auditing firm to make sure the vendor is in good enough financial shape to do your order.  I think this is a very solid piece of advice.

But all in all, I think one needs to be just as careful when choosing a China consultant or overseas sourcing company as they are when choosing a factory.  Because I for one would not want to have to go through a list of “a few hundred” vendors seeking a few whom I might be able to work with.  But whom I might not be able to work with as well.

www.theeastasiaco.com

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