The hottest diapers in China these days are “Made in Japan.”

I had an interesting inquiry this week from a Chinese company I met a few years ago in China. It seems that there is a certain brand of Japanese diapers that are all the rage in China nowadays and this company wanted to see if I could help them get a full container of diapers and ship them form Japan to China. I thought this was an interesting inquiry for two reasons:

1.) It shows that Chinese consumers are becoming more sophisticated and more concerned about quality.

2.) The idea that China is buying from Japan and not the other way around shows how far China has come. Ten years ago Chinese just didn’t import products from developed countries like the US and Japan. China is different now.

Anyway, I reached out to some Japanese trading companies here with this inquiry and found out some other interesting things. Apparently these diapers are so popular in China now that Chinese and Japanese companies have been buying them up in great numbers here in Japan to ship to China. The company that makes the diapers is apparently so concerned with this that they have raised the price dramatically on the diapers here in Japan and this has led to some trading companies hoarding the diapers. . Why would they be concerned ? Well, Apparently they manufacture products in China including diapers and sell to Chinese consumers under a Chinese name. But Chinese consumers prefer the diapers that are actually made in Japan. So Chinese consumers are buying the diapers from Japan at a premium and not those made in China. Even though it is the same company.

Japanese made diapers all the rage in China nowadays. Who woulda thunk it !

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Know your own product and you will cut your costs.

I always encourage my clients to know as much about their product as they can. Not only does it project a degree of professionalism when you know in depth about your own product but the more you know about your product the less likely it is that the vendor can manipulate you on costs.

There is another reason why knowing how your product is made is important: It can actually help you reduce costs. A case in point is a current apparel project of mine. My client needs a low manufacturing cost so she can get her product in the Big Box retailers and she has asked me to find a vendor who can reach her target cost. My first thought was that we should look at the design to see if there is anything we can do to cut costs. Because the product uses a heat transfer print in one of the designs the first thing I thought of was screen printing the design instead of using a heat transfer. In China there are various techniques for printing designs on apparel including heat transfer, laser printing for some embroidery patterns, screen printing etc etc. My customer was not really familiar with these when I ran the suggestion by her. When I asked some vendors about this they told me that yes, screen printing can be cheaper than heat transfer but only if there are 2-3 colors in the design. My client’s product has about 5-6 colors so one option I gave my client was to reduce the colors in her design, maybe down to 2 or 3.

Moreover cost on a heat transfer print is not determined by how many colors but by the size of the print. Designs are printed on one large piece of special printing paper and then transferred to the apparel. One pays according to the sheet size meaning that the more designs you can fit on one sheet the cheaper your final cost will be. If one sheet costs $ 0.20 and your image is so big that you can only get 4 images on one sheet then you end up paying $ 0.05 per image. If however you reduce the size of the image so that you can fit 8 images onto one sheet then you end up paying only $ 0.025 per image. Over 1000 pcs you are saving $ 250.00. Over 8000 pcs your are saving $ 2000.00. So you can see that there are ways to reduce your costs by playing with your design.

In short, if you go to your vendor with this knowledge already in hand it is very likely they will work with you on suggestions to decrease your costs. At the very least they will respect you. And that in itself is very important when you do business in China.

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From the archives: Don’t feel badly if you are having a difficult time in China

I read countless articles every week about how difficult it is to do business in China if you are a foreigner. That is certainly true. However, people who write these articles seem to lose sight of the fact that China is a difficult place to do business for anyone, even for the Chinese. This is a post I wrote about the subject back in 2011. Still relevant today and, I expect, for many years to come.

Chinais just a difficult place to do business. Period

Don’t let your guard down after you get a good sample.

One thing to watch out for when you source in China is to be lulled into a sense of security or complacency when you receive a good sample from your China vendor. Don’t get me wrong. A good sample goes a long way in establishing that your vendor can do your product. There are probably many vendors who cannot.

But making one sample is a lot different than making production for these reasons:

1.) Most vendors have a sample room where they specifically make samples for customers. In other words, your samples received a lot of individual attention whereas in production machines, or less qualified artisans, will do the work and there will be less monitoring of production.

2.) The people who make samples are generally more skilled than the people who make production. I have seen this many times. I once visited a factory and the sample maker was one of most talented individuals in the factory, whereas production was farmed out to local villagers of varying capabilities. And this is how cottage industry in China works.

3.) There are issues that come up in mass production that will not come up in sample production. For example dyes. In mass production dyes are very hard to control sometimes and you may have a wide variance in production lots. Getting dyes to be consistent sometimes takes a lot of supervision on the part of the factory. Making a dye for a sample is generally not a problem.

4.) Once you approve a sample, vendors will sometimes take liberties to cut costs. You may approve a sample and once you do the vendor will start looking for cheaper alternatives.

Still, as I said, a good sample is a very good start. Because you know the vendor can do what you want. But when you receive a good sample, your thought should be “, they can do it.” It should not be |”they have done it.” And the process then is working with your vendor to drill home the point, time and time again, that production needs to be as close to the approved sample as possible, if not identical to it. This point is even worth getting on plane and going to China to deliver yourself.

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From the Archives: The Importance of good communication

This is a post from a few years ago which addresses a subject I think is relevant in any relationship, business or other: good communication. I put a premium on timely communication. Quite simply I think it is one of the most important things to look for when you do business with someone. Lack of communication can lead to all sorts of problems and put tremendous stress on a relationship. So good communication is one of the things I value most in a prospective supplier. I don’t care how good a price is, or how nice the product line is, if the supplier does not communicate well, I will recommend that my client think twice about doing business with them.

The Importance of Communication

Renminbi (RMB) valuation and why vendors sometimes do not want your orders

I have always said that one of the best times to look for new vendors in China is when things are slow there. My reasoning is simple: When things are slow, vendors want your business and they will show more enthusiasm and a greater willingness to work with you. And overall I think this is true.

Having said that, there are times when vendors need the business but they are less than enthusiastic for an order. Why? Because the vendor’s perception may be that the margins for the order are too low and if something goes wrong they may have to absorb a loss.

This is kind of what is happening in China as we begin 2014. Many 2nd and 3rd tier vendors are struggling and need orders. But they are turning down orders because they are worried about RMB valuation. The higher the value of the RMB the lower the value of the USD, the currency used for their orders. In other words when a vendor takes an order in January and delivers the order in April they may lose money if the value of the RMB against the USD has appreciated substantially in that time. Just so you know, vendors get paid in USD but they have no use for those dollars because all their expenses, overhead etc etc are payable in the local Chinese currency. So vendors exchange the dollars for RMB with the Bank of China.

At the beginning of 2013 the RMB was trading at 6.3 to 1 USD. Now as we begin 2014 it is at 6.06 per USD, an all time high. And it will probably continue to rise. For this reason vendors are very worried about quoting on projects, and especially those with long lead times. And when vendors give you a quote on an product it does not mean they will honor that quote. If the RMB appreciates significantly some vendors, though not all, will more often than not attempt to pass the increase on to you as at some time during production. This is SOP and not something you should be alarmed about. You just have to anticipate this sort of thing happening and make allowance for the increase in your own margins when you plan your orders.

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From the archives: Evaluating suppliers, November 2010

One of the things I am going to be doing this year is going through some of my old posts and republishing those that I think are particularly valuable and still relevant. Here is a post I wrote in November of 2010 with some tips on how to evaluate a supplier. Evaluating a supplier is one of the most difficult things you will face when you source overseas and sometimes you should look beyond the obvious things, product quality and condition of the facilities, to look at less obvious markers.

Enjoy and Happy New Year !

Tips for Evaluating Suppliers