The best way to pass on QC requirements to your vendor

Companies that source in China have a tendency to lord over their China vendors and to demand perfection when perfection is just not realistic. Years and years of seeing China as a Third World country with cheap labor have informed this misplaced attitude. The attitude is not only anachronistic ( China now has the 2nd largest economy in the world) but it in effect sabotages a lot of buyer-vendor relationships in China. The buyer demands a “perfect” product. The vendor has limitations over which they have no control and they cannot deliver. The buyer does not understand and comes to see the vendor as irresponsible and insubordinate. Throw in a little anti-Chinese sentiment on the part of the buyer, and anti- foreign sentiment on the part of the vendor and before you know it the buyer is looking for another vendor.

I have been caught in the middle of relationships like this many times and I think it is more often the fault of the buyer than the vendor. Buyers treat every QC point as a major issue the end-result being that the vendor becomes very frustrated and just wants to finish the order ASAP. And then things just start spiraling out of control. For this reason, I always try to work with my customers to get them to not only to clearly delineate what the QC points are but to go one step further and establish in their own mind which of those QC points are “Critical,” which are” Major,” and which are “Minor.” I always ask them, “Is this really critical and is there not any way you can live with this?” The whole point of this exercise is that I want vendors to spend their time and energy addressing critical and major defects, and not minor flaws that are not likely to impact sales. I do not want vendors to get burned out on the “little stuff.”

Critical points I feel should be limited to a few things and should be discussed in the most serious terms with the vendor. Major defects should also be discussed but the tone should be firm but flexible i.e. “please do your best to avoid these, if we see this problem too much we will have to reject it because we may lose sales” Minor defects, I feel, should be mentioned to the vendor only once, and sometimes maybe just in passing. Minor after all is minor.

Just put yourself in your vendor’s shoes for a moment. Is it going to be easier to work with someone who comes to you with ten problems and in a panic tells you they are all critical and need to be addressed immediately, or to work with someone who comes to you with ten problems and very calmly tells you three are critical and need immediate attention, three are serious and should be discussed at length, and four are not really serious and should be just mentioned in passing? Who would you rather work for ?

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Some advice to a prospective client on Intellectual Property (IP)

This week someone was asking for my advice on filing patents and trademarks in China before they source there. Of course in an ideal world you want to afford your IP all the protection it needs to ensure no one can take your idea and profit from it. But sometimes the window of opportunity for a new product or design is open for a very short time only and you have to move quickly if you want to build your business. In short, how much IP protection you give your product depends on your resources and how you see your own business. Below is my response to the person who ran this question by me.

I can understand your concern because I sometimes come up with ideas for products which I run by vendors in China and I am always a little careful because I know there is the risk that someone will just take my idea and run with it before I do anything. And so I was thinking today what I would do if I had an idea for a product and all the time and money in the world to develop it. In other words, what if I were financially secure regardless of the product and I was pretty sure that no one would come up with the same idea as me in the near distant future. The answer is I would try to protect my IP as completely as possible before I gave the designs to someone else. This would mean registering all patents and trademarks in my home country and manufacturing country before I actually started sourcing. And I would wait a year or two for the patents and trademarks to be approved before I got started.. Again, this is what I would do if I really thought I had a unique product and I was in no hurry and facing no financial burden to bring it to market as quickly as possible.

If on the other hand I was operating on a tight budget and I felt the need to get my product to market quickly I would probably just secure all my patents and trademarks where I would be selling the product and not worry too much about registration in China. My thinking is that as long as I have products to deliver to my customers and build my business I don’t care what they do with my product in another country. At the most I might just file for trademark registration in China at the onset of sourcing, just to have something on file in the event someone took my trademark and attempted to block my shipments. I certainly would not wait a year for the trademark to be approved because in that time someone else may come up with an idea similar to mine. And that is a year of lost sales. However, as soon as I was in a good position, in other words when sales were strong and it was obvious I had a viable business I would take care of all the China registrations and do so ASAP.

But once again this is just me. I think you have to look at your product and your business and where you want to be a year from now, two years from now, five etc etc and make your own decisions accordingly.’ Know thyself ‘ as it is often said.
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Are Mexico and Latin America really an alternative to China ?

I have a project currently sourcing some home décor suppliers in Mexico and Latin America. And I must admit it has been harder than I thought it would be. The main reason I think is language. I have looked at the websites of 10-15 trade shows in Mexico and Latin America and I think only 2 or 3 had English versions. I was quite surprised by this because some of the shows look to be rather large in scope and are advertised as such, albeit in Spanish. And of the 50 or so websites of companies I visited I would say that only about 10% had English language versions of their websites. Nevertheless I learned the requisite Spanish to describe the product I am looking for and I emailed a handful of vendors in English assuming they would have someone who understood English and would get back to me but that so far has not been the case. The response has been nothing short of dismal. The response rate has been about 5%.

Of course this is just one project and just because vendors have not replied immediately does not mean I should cross them off my list. I do think there are probably some good suppliers for my client in Mexico or Latin America. But finding them will be far more difficult than were I looking in China. In China most companies have English versions of their websites and some staff who speak pretty good English. You will not find a big trade show in China that does not have an English language version of their site. And if I emailed 50 vendors out of the blue I think about 30 would get back to me within 48 hrs. And this is one reason why China has become a truly Global Player.

To source effectively in Mexico you probably have to spend a fair amount of time in the country visiting trade shows and suppliers and going back often to supervise production. Of course this is what I always preach to companies that want to source in China as well. However, I think the difference is that China vendors are far more responsive, just move a lot more quickly (obviously) and they somewhat understand the concept of Customer Service. For this reason, I think small to medium sized consumer goods importers in the US and Canada who are looking at Mexico and Latin America with the goal of shortening their supply chain probably need to stay with China a little bit longer.

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The first thing a prospective vendor will look at: Order QTYs.

I had a client a couple of years ago who could not understand why a vendor in China was not interested in his order. I explained to him several reasons which he turned a deaf ear to. He insisted that I keep contacting the vendor saying to me: “They are a business. They want to make money.” Unfortunately it does not work that way in China.

The first thing a China vendor will look at when you run a project by them is the order QTYs. China vendors want large orders because obviously the bigger the order the more money they stand to make. And this is especially the case with low cost consumer goods. For example if you give a vendor an order for 10,000 pcs, let’s say a kitchen utensil, and the vendor’s profit is $ 1.00 per pc. then that is just a $ 10,000 profit. And it may be that after some unforseen costs are added up on the production side the vendor may end up keeping just half of that. Needless to say, an order of this size is hardly worth the effort for a medium or large size factory. If however you have 50,000 pcs on the order and the vendor is making $ 1.00 pr pc then that is a more interesting order for them.

The problem here is that for most small businesses a 10,000 pc order is a big order and sometimes represents a sizeable investment, as it did to the former client I mentioned above. So what we have here is a big disconnect. A large order for a small company becomes a small order for a large factory. What the small company sees as a serious business proposal is regarded by the factory in China as an insignificant inquiry.

The key here is to manage your expectations. If you are a small business just starting out your orders are going to be small. You have to prepare yourself for a lot of rejection when you look for a supplier, whether that rejection is in the form of an unanswered email or a high quote. With those suppliers that are interested in your business ( and make no mistake about it there will be some) you have to proceed carefully. Vendors that accept small orders are likely vendors who do not have a lot of orders – if they did they would not be interested in your QTYs. Vendors who do not have a lot of orders are probably not good vendors, low cost, low quality vendors as I refer to them. With these vendors you can still build your business but you will have to manage them and monitor quality very closely. It may be that every order you will need to inspect in China. At least if it were my business that is how I would do it.

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