In China sourcing, foresight is always better than hindsight

I was thinking today about small importers who are sometimes reluctant to undertake the cost of an inspection in China. Of course they do not want to do this because the cost of the inspection might be more than the nominal value of the PO. To conduct an inspection in China by yourself can easily cost 5K ( air fare, accommodations for a week and expenses). There are options, like hiring a China based inspection firm, but depending on your product this may or may not work. Inspection firms in China use local inspectors and they only have a superficial understanding of your company and product. If you have a design driven product then using a local inspection firm, I would argue, is only one step above asking the vendor to do the inspection, So in my mind there really is no substitute for doing the inspection yourself.

But it is uncanny how many people just do not want to do an inspection. Their thinking is simply, “Why do I want to spend 5 K to go inspect this order, when the value of the PO is only $20,000. If I go to China my overhead goes up $5,000 and that is a lot of money for me, a small business. I just cannot afford to do an inspection. And I don’t want to go to China anyway. It is too far away.” All this is fine and dandy until you consider what the real value of the order is: is it the monetary value of the PO you give to the vendor in China or is it the potential sales of the product to customers at home ? In other words, is it a $20,000 or a $40,000 ? I would argue that the real value is the value in potential sales. If you accept that you will see that it makes plenty of sense do an inspection in China even if your order is relatively small. Going back to my example, if you place an order in China for $ 20,000 worth of product but you don’t inspect it and the order comes in bad, then you lose potentially $ 40,000 in sales and even more in repeat sales. If you inspect the order and it comes in good, then you stand to gain $ 40,000 in sales, less the cost of your inspection visit (still you are doing well).

I would add that if you are doing an order in China for an important customer, – albeit a small order – it behooves you to inspect or risk losing your customer. Once again you have to ask yourself if significantly reducing the risk of losing an important customer is worth the cost of a trip to China to set up your production and make sure as best you can that it goes well ?

These are all things to keep in mind when you do that small China order. If you feel you can live without doing an inspection that is great. More power to you. But if you foresee significant lost sales, no matter how small the monetary value of the PO, then it is probably a good idea to book your ticket to China.

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