Don’t feel complacent with your China supply chain

I currently have an ongoing sourcing project for a US apparel company. I have found several good candidates for my client. All of these companies have submitted samples based on my customers specs and we are feeling pretty confident that at least one vendor is going to work out. Over the last year we have probably approached about twenty vendors and have had about ten of those vendors submit counter-samples. And now three vendors have passed muster as far as pricing and being able to produce a top quality sample. I always say the goal is to have a primary vendor and a couple of back ups. And that is what we have now.

Still the other day I received an unsolicited email from an apparel vendor in China who I think may be able to do this product as well. My gut feeling is that even though we already have enough vendors lined up I might as well go ahead and send them a sample to see if they can do something. It certainly cannot hurt ( I mean it costs just $ 5.00 to send a sample to China) and will be a good way to establish a connection with them. And this got me to thinking that although you may have reached your goal goal of having a primary vendor and a couple of back up vendors in place, this does not mean you stop looking for more vendors. It just means that you don’t look as actively.

So if you feel that you are all set as far as your China vendors go and you get an unsolicited email from a new vendor telling you they can do your product, don’t just ignore it or delete it. Send them a sample and get a quote. Because in China sourcing you just never know when you are going to need a new vendor.

IMG_9133

Advertisements

The right way to look at your business.

I am helping a small company in California now find suppliers in China and Bangladesh. Their current supplier in China doubled their prices after just one order and that is when this company came to me. I explained to them that it is SOP in China for vendors to drastically raise prices after one order and that they should not be surprised by this. In the west when a new supplier raises prices after a first order it is deemed not a good business practice. China vendors understand this but sometimes their only hope to get an order is to offer low prices, sometimes so low that all they can do is break even on a first order. Their hope is to do the order to the satisfaction of the customer so that the customer will tolerate a price increase on a second order. China vendors really have nothing to lose by doing this. If they only do one order they may make a slight profit. If the customer leaves after one order because of the price increase, the Chinese company can tell itself it would not have been able to do business with them anyway.

The company in California sells primarily online. Some Big Box retailers have expressed interest in this company’s products but the price points have to be much lower than they are currently. This is another reason they have come to me. Unfortunately with their QTYs there are not going to be a lot of China vendors that are interested in this order. Still a handful of vendors have told me they will do the order. I really don’t know much about some of these companies, save for a couple whom I have met and dealt with before. I did mention to the California company that at some point they need to get on a plane and go to China to vet their suppliers. Their reply was that this kind of trip was not in their budget. To that I said fine, no problem. I explained to them that there is a huge difference in sourcing a supplier for a major order for a big box retailer and sourcing a supplier for an online store. If you sell online and a China order goes bad then you will lose a few customers and probably some loyal ones. This is certainly not desirable but your business can recover from this. If, on the other hand, you are selling to a Big Box and a China order goes bad you will lose one customer, but that one customer may be ordering 20,000 pcs of your product. In other words, that is not a customer you can afford to lose. So for right now, budget constraints in all, sourcing online and doing one time only orders with a succession of vendors, though not desirable, is OK. But if this California company does get that big order they are going to have to make an equally big investment which includes going to meet and audit the people who they are asking to help put their business on the map.

mr huang

Why it is a good idea to provide a target cost when you have an RFQ

The other day I got on the subject of providing vendors with a target cost when reaching out for a quote on a product. Someone had emailed me about a prospective project and had told me it was their understanding that one should not provide vendors with target costs with requesting quotes. I told this person that when I was in the wholesale industry I always worked for companies who gave vendors target costs and that I have adopted this practice in my own business. And I have come to see it as a great SOP that can save companies a lot of time and money. In fact, I have never understood whey some people do not want to provide target costs but I think it is in the hope that they will be able to get a product for much cheaper than if they were to suggest a target cost to the vendor. I this thinking is a gamble and I never advise it. I described why in another blog post last year. Target Costs

However as I thought more about target costs I came up with this analogy. Let’s say you were the manufacturer and someone came to you and wanted a quote on a product and just told you to quote without providing a target cost. I don’t know about you but my inclination would be to believe this person did not know much about their product and its “true” cost. I might not even take them seriously depending on their order QTYs. On the other hand if someone came to me and wanted a quote on a product and told me that my quote had to be around X amount of dollars I would assume that this person knew his/her business and product in depth. I would take them seriously and provide them with a cost that would hopefully be in the neighborhood of what they were expecting to pay. This is the kind of company I would want to do business with.

img_0161.jpg

The value of alibaba is not in meeting vendors but knowing where to look for them

I have a new project sourcing suppliers in Mexico and Latin America ( I use the term Latin America here in the wide sense to include South America and all coutries where Spanish or Portugese are spoken). This project is on behalf of a client whom I had helped before, with some success, to find vendors in China and Indonesia. So they came to me and asked me to help them now in Mexico. I must admit that it is a new experience for me sourcing suppliers in Latin America. But already I have found it interesting. One big difference is that many suppliers in Latin America do not have English versions of their websites. In China most vendors have an English page. Let’s just say that I wish I had paid more attention in my 4th grade Spanish class.

Although I always advise against using alibaba to meet vendors, for the simple reasons that you really have no idea who someone is, the low costs are often tied to astronomical MOQs and there are probably a lot of agents posing as factories there, I do nevertheless find alibaba very useful for gathering info. I can sometimes get an idea of where suppliers for a certain product are clustered ( one way I use alibaba) and as is the case with the current project I can tell which countries in Latin America might be useful to target. You can do a search by global region, eg. Europe, Asia, The Americas etc and find out how many suppliers there are in each country in that region. So I can look at Latin America and get the breakdown of the number of suppliers for product A by country. I then know which countries to target and which to ignore. In this case Mexico and Brazil are the countries to target and the other countries are not worth my (or my client’s time). Some countries may have only a few suppliers listed on alibaba.

Another way to find out which countries might be worth targeting is to look at trade shows by country. I found for example that only Brazil and Mexico have substantial trade shows. Many of the other smaller countries in Latin America and even some of the larger ones may have just a few trade shows a year across all industries.. This is not to say you cannot find product there. Of course you can, but the lack of global commerce probably signals a lack of infrastructure. And a lack of infrastructure may not allow you to export your order smoothly It will just have the result of adding a lot of costs as your product travels down the supply chain.

IMG_1991

The importance of knowing your product’s safety and testing requirements

Most if not all consumer products sold in the US and Canada have some product safety, labeling or testing requirements. Requirements are especially numerous for Children’s product because of CPSIA (Consumer Product Safety Improvement Act of 2008 ) but in fact almost all products have some sort of consumer product safety requirement. If you are a first time importer from China, therefore, you need to do your homework as far as testing requirements for your product are concerned. This is very important not only for the obvious reason, that you want your customers to be sure they are getting a safe product, but more importantly you need to pass on your product safety and testing requirements to your vendors very early on. Factories in China have customers from all over the world and the product safety requirements generally vary from country to country. If you don’t have this conversation early on with your vendor you may find out that the product cost you were quoted in the early stages of your negotiation and on which you based your business was based on a vendor cost for raw materials that will not allow your product to pass product safety tests in your country. The difference in cost between environmentally friendly raw material and raw material that has not been filtered to remove dangerous levels of chemicals is sometimes great. So before you approach any vendor with a request make sure you know what you need in terms of product safety compliance.

The best place to begin to educate yourself about product safety requirements is the CPSC website. http://www.cpsc.gov/en/regulations-laws–standards/cpsia/the-consumer-product-safety-improvement-act/

Also it is a good idea to work with your shipping agent (if you have one ) because they may know about certain import restrictions in place. I remember I had a customer once who wanted to import a decorative product made with feathers from China. When I checked the CPSC website I saw that there had been an import restriction in place on any product made with bird feathers because of the avian flu in China. Fortunately for my customer the ban had been lifted. But this is the kind of problem you need to anticipate.

IMG_6424