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.
It is very common for China vendors to be late on orders and go past the delivery date in the sales contract. Vendors may have bottleneck in their supply chain, esp if they use cottage industry sub-contractors, they may have to deal with power outages or bad weather, or they may just be bad managers who do not make their customer’s priorities their own. In short, anytime you give an order to a factory in China you should anticipate that it will be late.
So what, if anything, can you do to discourage vendors from delivering a product late ? There are a few things as follows:
1.) It is common to have an LD (Liquidated Damages) clause in your sales contract with your China vendor. This clause imposes penalties on the vendor if the agreed upon delivery date is not met by the vendors. Usually it is a percentage of the order or there is a charge for each day over the delivery period. Most China sales contracts I have ever seen have this but it can do more harm than good, depending on how it is handled. In fact, some people advise leaving it out of a contract altogether.
I for one think the LD clause is a good idea if it is structured reasonably and does not assess severe penalties on the vendor or seem threatening. A per diem late charge is better because it just seems more reasonable than charging a vendor a percentage of the order ( what some LDs do). Vendors of course will try to recoup any damages they are forced to pay – esp if they have subsequent orders with you – but that is to be expected. The purpose of the LD is to serve as a reminder that the vendor has promised to ship a product by a certain date. You should see it as a nudge and not a hammer. It also gives you a pretext to talk often about your contract to remind the vendor of their responsibilities. Vendors are very busy sometimes so the more you remind them about these things the better.
2.) Get regular updates on production. By regular I mean weekly. Have a conference call every Friday with your vendor. Request photos every week showing how much has been done. Photos can be very valuable in seeing what the vendor has accomplished. And I am not talking about just a few snapshots here but extensive photos. The value in doing this is not so much to push your vendor ( some vendors cannot be pushed), but to make yourself aware as early on if an order is going to be late. You can then inform your customers in a timely matter, rather than having to surprise them.
3.) Have realistic production and delivery dates. Many China importers want their products as fast as possible because the product life cycle in their own countries can be very short. Not knowing much about China production, buyers sometimes ask for unrealistic delivery dates. Vendors want the orders and promise everything under the sun. Although every industry, every product, every order is different, you just should not expect to see any order out of China in less than 6-8 weeks. Keep this in mind when you go over your delivery dates with your vendors in China. If they tell you they can complete your order in less than a month, don’t believe it. Or, believe it and tack on a few weeks.