Product testing is a real minefield

What people are saying about Mulberry Fields
” I REALLY do enjoy your posts and find them informative and helpful.” – a Wal-Mart supplier

A client of mine sent me an email the other day asking about some testing for his products. Since it is a children’s product there are many requirements as per CPSIA/CPSC. I advised him that beyond the obvious tests for phthalates and lead he should consult the compliance guide of his customer, a major Global retailer. He told me that the compliance guide is very generic and does not answer some of his specific questions. My advice to him then was to work through his buyer who could then ask her product safety dept. And to get everything in writing of course.

I then emailed a friend of mine who works for a children’s’ products company and has a lot of experience with testing of children’s products for major retailers in the US. I told her who my customer was selling product to and asked her about some of the testing. Her reply was as follows:

“ The big surprise for him will be that name of retailer does not know what CPSIA compliant means, the labs don’t really know, even the CPSC does not know. In the end, if the customer has to educate himself and make some judgment calls. It is a complicated and very frustrating experience.”

I thought this was an interesting reply so I went online and did some reading on my own. I found a very interesting blog post about detailing the House Subcommittee on Commerce hearing in 2011 which covered CPSC and CPSIA guidelines. It makes for a very entertaining read. Here is the link http://amendthecpsia.com/2011/03/cpsia-answers-to-supplemental-house-questions-hearing-of-feb-17th/

The point is product testing is very complicated and you cannot rest on assurances from one or two individuals about what tests you need to do. You need to do a lot of research on your own. And just to cover yourself you should get all discussions with labs and your buyers/customers in writing.

Here are some related posts on this subject.

Product safety
Product detail

http://www.theeastasiaco.com

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Do you really need to speak Chinese to do business in China ?

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

I was talking with a client yesterday who told that he met someone recently who has been sourcing out of China for over twenty years and this person said that it was not necessary to speak Chinese. I do not disagree with this. If you go to the Canton Fair you will see that 99.9% of overseas visitors speak little or no Chinese. And many of them do just fine, I am sure, doing business with vendors who speak English.

Still I think it is much harder to do business in China if you do not speak at least a modicum of Chinese. The advantages to speaking Chinese are many. Some are as follows:

1.) You will have more vendors to choose from. Many vendors are more comfortable speaking in Chinese than in English. It is no reflection on the vendor if they do not speak English well. It may simply be a geographical or personnel issue ( maybe the local foreign language college just does not have a lot of qualified candidates). If you insist on English you may very well be eliminating perfectly good vendors.

At the same time how well a vendor communicates in English should not be a deciding factor in choosing a vendor. I would rather deal with a person who replied promptly to my inquires in imperfect English (or Chinese) than one who replied in fluent English but who was not reliable. I know a lot of vendors like the latter. In short, a vendor’s attitude and capability in making your product should be the determining factor in whether you give them an order. English should be a consideration of course (after all communication is very important) but you don’t want it to be the main criterion for your vendor selection.

2.) Your vendors will respect you more if you show them they can speak Chinese (Even though they will always want to communicate with you in English it is important to show them that you can speak a little of their language as well). Make no mistake about it that business in China is changing and nowadays it is as much you soliciting their business as it is they soliciting your business.

3.) If you can achieve some proficiency in Chinese, you will understand a lot more about your production when you are at the factory. You will have the opportunity to talk with workers and managers about your product. When you use a translator these discussion are filtered so you only hear what you want to hear. And if CSR (Corporate Social Responsibility) is important to you and your customers then when you are at the factory it is imperative that you talk directly to the workers. Of course it takes years to learn Mandarin well enough to be at this level. But if you plan to do business in China for many years, you might as well start now.

4.) You may hear things you are not meant to hear which will allow you to make important decisions. I once overheard a discussion between a vendor and a factory owner about a YKK zipper which the vendor had told me was genuine. The factory owner, however, told the vendor that she didn’t know if it was genuine. Well, right there I knew that I was being mislead and based on this I did not select this factory. Of course if I did not know Chinese then I might have ended up putting zippers on my bags that broke after a day’s use. In this instance my knowledge of Mandarin proved invaluable to my client.

5.) If you do travel to China and speak no Chinese, you may experience a lot of frustration and this may color your visit with your vendor. On the other hand if you can speak some Chinese you will probably be more relaxed overall, you will have more fun and this will inform your relationship with your vendor.

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China is a great place to do business. But don’t let anyone tell you it is easy!

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 children’s products company in Toronto.

I am doing an article for my June newsletter EAC Newsletter subscribe on Home Depot’s failure in China and the thought occurred to me that, look, China is just not an easy place to do business. Home Depot invested about 130 million dollars in its 12 stores in China and they closed the last of them in Sept 2012. When you think of how much planning and investment went into the venture it is really astounding that they failed. After all, we are not talking about a small regional DIY chain here but the biggest DIY store in the world. Ditto for Best Buy who attempted to enter the China market but closed the last of their five mega stores there last year as well. What is the line in the Robert Burns poem, “The best laid schemes of mice and men often go awry.”

I think it is useful when you source in China to remember the examples of Home Depot and Best Buy et al. From what I have read the main reason that Home Deport and Best Buy did not succeed in China was that they simply just failed to accept the fact that China is different from the US and that success in the US does not necessarily translate to success in China. So keep this in mind at all times when you are sourcing or doing business in China. Respect China for what it is and do not force your external cultural pre-concepts and expectations on the country you are doing business in. And and give yourself a break if something does not go as you expect. As I have said many times before, the goal to succeeding in China is managing your expectations. And a heavy dose of realism does not hurt either.

I sometimes have what I call a “China Zen Moment.” This is when I see beyond specific topics like auditing vendors, product testing, trade shows, communicating with vendors, doing spec sheets etc etc and I am able to reduce China Sourcing to its simplest terms. Here are some of those Zen moments
How to win in China
China quality is not that bad
Doing business in China is easy
Don’t expect perfection
Locals too find the going difficult

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China’s internal consumer demand spells competition for overseas companies sourcing in China

What people are saying about Mulberry Fields
“What you say is absolutely true about what you need to do in order to succeed in China.” – a company in Italy

I was reading a report on China’s textile industry recently. The astounding thing is that demand from inside China for home textiles is growing while demand from outside China is decreasing. In the first 6 mos of 2012, for example, domestic demand for home textiles grew over 20% over the previous year whereas demand from outside China in the same period grew just over 1 %. The same trend can be seen in other industries as well. For example, domestic demand was a driver last year in China’s seasonal decorations industry as orders for Christmas goods from abroad slumped. Over 30 % of orders for seasonal goods in some manufacturing belts came from within China. Christmas after all is big in China too, believe it or not.

This really underlies what I have been seeing over the past couple of years, namely that China vendors are no longer desperate for orders from the countries that have traditionally driven China’s export industry over the last 30 years, for the simple reason that there is growing demand from within China. I would add that China’s export markets showing the most growth recently are from emerging market countries ASEAN Nations, Russia, Africa et al. These were the countries driving home textile exports from China in 2012. And this is why on some projects when I send out inquires some vendors do not even bother to return my emails if they have decided they do not want the business based on my target costs or QTYs. Many vendors nowadays have a simple take it or leave it attitude. I think this is the most challenging thing about doing business in China nowadays.

If you are sourcing in China you really need to be aware of this. You need to be organized, polite and most importantly flexible on price and on quality as well. As I am in the habit of saying recently, over the next decade sourcing in China may be as much a case of you soliciting their business as they soliciting your business.

Here are some other blog posts on how China is changing and the implications for you:

Work on that attitude when you do business in China
Quality not cost
The End of Cheap China; Book Review
Buyers and suppliers nowadays

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Is it better to go with a big vendor or small vendor in China ?

What people are saying about Mulberry Fields
“….very impressed with your blogs and knowledge.” – former Director of Product Development at Williams Sonoma

This is a follow-up post on a blog I wrote a few weeks ago about a client of mine who is thinking about giving an order to a good size company which is part of a conglomerate. Selecting a vendor

I remember about eight years ago I was working for a company in the US and I was in China with a couple of my colleagues to visit some suppliers. On our agenda was a courtesy visit to a big vendor outside of Shanghai, a vendor that supplied some of the biggest home décor retailers in Europe. Our orders must have seemed small in comparison and I am not sure how important they regarded us. However, the first clue was when they I called to arrange a time to come visit and the vendor did not offer any transportation to their office (highly unusual in China). When we arrived at the office we were asked to wait for 90 minutes. When our Account Manager came out, after exchanging pleasantries he asked us “what can I do for you?” And the attitude displayed during that visit was pretty much emblematic of their attitude when we did business with them. When there were problems it was hard to get them solved. And the only reason we continued in the relationship with this supplier was that they were European managed and had very high quality standards. But we were obviously too small to count for much with them.

More recently I met a bag vendor at the Canton Fair. This is a big company and they do bags for a lot of well-known companies. They were friendly and the costs they gave me at the fair were extremely good. So I thought I would give them a try. Accordingly after the fair I began the process of developing samples with them. Whereas other vendors took a few weeks or so to get me samples this vendor took over two months, and only because of constant follow-up emails from me. The sample, however, was good and my client wanted to proceed with them. I told her that I couldn’t recommend this vendor anymore because of all the delays but I would at least follow-up with them as she had asked me to do. I sent them an email accordingly and when I did not hear back from them in a couple of weeks, I told my customer that she really was barking up the wrong tree with this vendor. She simply did not have the order QTYs that interested them. She agreed and we dropped them from the list. Two months later, the vendor replied to my email. Our decision had obviously been the correct one.

Although it would not be accurate to say that all big vendors give you this lackluster treatment, it really is the typical treatment you will get with big suppliers in China – unless you are an important customer for them and have very good order QTYs.

Another thing to consider is that if you have a design driven product and you are used to working closely with your vendor you are much better off working with a smaller vendor even if costs are higher. You will not be able to expect the same input on your design from a large supplier. They are just too busy.

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Critical defects vs acceptable defects. Giving vendors a break is good for buyers too.

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.

A client of mine is about to give an order to a vendor in China. I have advised him to give the vendor a QC checklist as well as adding all QC points in an appendix to the Sales Contract. QC points should also go on all product spec sheets submitted to the vendor. The idea is that whenever that vendor is looking at your order, your QC points are going to be reinforced.

At the same time you should establish in your own mind what are “critical” QC defects and what are acceptable QC defects. Critical defects are things that would make the product unsellable or returnable by your customer. For example on a wooden picture frame a “critical” defect would be a broken clasp, a cracked frame or glass. An acceptable defect might be a shade of color lighter than specified, a streak in the velvet fabric on the picture frame backing, etc. These are things a customer might notice but would not likely result in a return or lost sale.

In your discussions with your vendor on the QC checklist you should make sure you tell your vendor which defects are going to be considered “critical.” And give these points special emphasis. This is not to say you should not make equal mention of acceptable defects. You should but the tone of your directive should be “please try to avoid these problems” instead of “we will not accept product with these problems.” The idea here is to cut your vendor some slack so that they can feel confident in making your order and to avoid confrontations about quality unless it is your perception that the issue clearly jeopardizes sales of your product.

As I always say “Work with your vendor. Not against them.”

Here are some related posts that will help you work with your vendors, and not against them.

Setting tolerances for production
Being on the same page with your vendor
Inspections are good for your vendor
Give your vendors specs ASAP

China’s rising labor costs and how this affects you.

What people are saying about Mulberry Fields
” I REALLY do enjoy your posts and find them informative and helpful.” – a Wal-Mart supplier

I had an email from a client this morning asking me about China’s rising labor costs. He simply wanted to know what I thought. I told him that I covered this in my Feb newsletter. So I am posting that here today.

One of China’s biggest challenges these days is how to spur more domestic demand for its goods and services. This is necessary as orders from overseas slowed dramatically following the Global Economic Crisis and have not yet recovered. It is also a long term goal of the Chinese Central Govt to build an economy that is driven more by domestic demand – a market driven economy – than by overseas demand – an export driven economy. To this end the Central Govt. has encouraged provincial governments to raise wages so that Chinese consumers will be able to afford more Chinese products. At the same time local governments have seen that rising wages will attract more migrant labor and this will keep their local economies healthy. For the above reasons minimum wages in China are rising at steady levels. From 2010 to 2015 minimum wages across China are expected to show an 84 % increase. This is why you often see headlines nowadays about overseas companies moving to other countries in Asia or even back to the US or Canada. Even some Chinese companies are beginning to outsource orders to offset rising costs.

In most cases suppliers try to offset rising wages with energy saving measures in their facilities but inevitably some of those higher costs are passed on to the customer. Those cost increases may or may not be substantial depending on where your vendor is located. Vendors in the well known coastal areas, Shenzhen, Xiamen, Shanghai etc. have to offer much more compensation to keep workers in place than vendors in, say, Henan or Anhui Provinces. Another thing to keep in mind that rising wages really have the biggest effect on low end/high volume manufacturing where the unit cost is low. A $ 0.25 cost increase per unit that your vendor passes on to you so that he can hire and retain skilled workers may make your project untenable if your target landed cost is just $ 2.00 to begin with. In short, rising wages in China and how this will impact your business there really depends on what product you are developing in China and, again, where you are developing it. Finally you have to remember that even with rising wages across the board in China the “China cost” in some areas of China is still well below what it would cost you to make your product in the US or other developing countries. In other words, don’t pay too much attention to the headlines about rising costs in China.

The real lesson here is to familiarize yourself with the province(s) where your products are going to be made. Do keyword searches for all your China provinces with terms like “rising wages, “migrant labor,” “labor practices,” “energy shortages” etc to anticipate what the potential hurdles would be were you to do an order with a vendor in that province.

Here are some other posts about changing conditions in China and how they affect you:
Job mobility in China
China’s newfound global status
Outsourcing within China
Rising raw materials costs

www.theeastasiaco.com

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Don’t celebrate that first big order just yet.

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 children’s apparel company in Utah

I came across a great article in Forbes recently about small companies getting on the map with orders from big retailers. I was very much interested in the article because I would say that about 50% of my clients over the past couple of years have been small companies that were fulfilling orders for global retailers. Most of them start out small selling on the retailer’s online site, but at some point as their products do well in online sales they are approached with an offer of store sales. And that is when the QTYs go up astronomically. Taking Home Depot as an example, well, HD has 1 website but they have about 2500 stores in the US. In other words, once your product is on the shelves at Home Depot, your exposure is going to go up very quickly. So you have to be ready, which was one of the main points of the article.

According to the article there are four things small businesses need to do when they get that first big order:

1.) Make the delivery date.
2.) Enlist the help of professionals to make sure the first order goes smoothly
3.) Be flexible to change your business model.
4.) Don’t assume that just because it is a big order, it is a good order for your company.

Let’s look at each point as it applies to fulfilling orders that are sourced in China.

1.) Hitting the delivery date. In order to do this give yourself and your vendor plenty of time. Do not consent to unrealistic lead-times dictated by your buyer. It is probably better not to take the order than to take it and deliver it late and subject to cancellation. As the Forbes article makes clear, if you mess up on your first order you may very well not get a second chance. The thing to keep in mind here at all times is that your China order is more likely going to ship late, than early or on-time. That is the nature of off-shore manufacturing. Anticipate delays and build them into your discussions with your buyer. If buyers want your product badly enough they will be flexible on the delivery dates. I would also venture to say that it is more important your supplier is comfortable with your delivery date than your buyer.

2.) Do not try to handle China by yourself for your first big order. It is too difficult. Hire a consultant to help you with vendor management and also make sure you are working with a logistics company or freight forwarder to handle customs and delivery. Make sure you cover all the bases and have smart people in place to handle all phases of the operation.

3.) Look at options for your product that will keep costs down and make it more likely that the order will go well. I have one client who has looked into getting his packaging done in the US because it does not cost significantly more than doing it in China. Needless to say, he will be in more control of his production if he does his packaging domestically. Smart move. But the main thing is that he is thinking of options.

4.) Just because you get a big order don’t assume you have it made. Big retailers will beat you down on price and in the end it may not even be worth all the trouble and cost to take the order. Big orders sometimes turn into complete fiascos. So be philosophical above all else. In short, don’t take the risk unless you have sat down looked at the order from all angles and you are sure it is worth it.

Here is the link to the article. Enjoy
http://www.forbes.com/sites/sap/2012/11/07/the-walmart-effect-4-best-practices-for-dealing-with-that-first-huge-order/

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